buying points on a loan

[snoozer]

I am sure this has been asked before, but just too busy to spend time doing searches.

We are about to purchase a new home... in the $250-300k range with 20% down. typical 30yr mortgage, rough rate of 6%, no points.

Someone asked if I was going to buy points, to be honest, I have never even though about it. What are advantages/disadvantages of buying points? it is the cost the same at every company or do rates very?

Any input would be greatly appreciated. Probably won't buy for a few month's be like to get started on the details early

 

[rrc]

Don't do it.

Let's say the purchase price is $250,000

Down payment $50,000

$200,000 mortgage @ 6% ...$1199.10

A point is typically 1% of loan....$2000

If the new rate is 5.75%..payment = $1167

You would be saving approx $32 per month, it would take you 62 1/2 months to make your $2000 back

Hope this helps.

 

[MadJack]

each point will only reduce your interest by 1/8%. all you're doing is paying interest upfront to reduce your payment. bad deal.

 

[Franky Wright]

DO NOT BUY DOWN THE RATE:SIB

Unless that is the only way you will qualify for the mortgage that you need to get the amount that you need to purchase the home you have chosen.

Yea, what RRC said

Franky

 

[Sun Tzu]

never

 

[Penguinfan]

We were given the option of paying our mortgage every two weeks (half a monthly payment each time), this pays an extra payment a year all toward the principal and we never really notice it from our household budget.

I'd say this saves us a ton more interest than buying points ever would have.

 

[The Sponge]

What you could try to do which i pulled off was make the seller pay your points. Not sure how bad they want to sell this house. Houses two to three years ago in my neighborhood couldn't go fast enough and now i see five of them just sitting there waiting to be sold. Give them a sob story saying you can't get a loan without points and tell them you will buy the house if they pay the points. Worth a try. Good luck.

 

[redsfann]

Penguinfan-

You didn't pay anything for them to set that up for you, did you?

We add a bunch every month to our mortgage payment; my 20 year mortgage(when we refinanced 4 years ago) would become a 14.5 year mortgage if we were staying here.
But since we are planning on moving within the next year, it just means that much more equity in this house that we will roll right over into the next one.
And we will do the same thing with the next mortgage, unless we just go with a 15 year from the beginning.

 

[Morris]

When we bought we made sure it didn't have a penalty for paying the house off early. We added an extra hundred or whatever we had extra each month. Paid the house off in about half the time. Saved a ton of money on interest. GL

 

[The Sponge]

When we bought we made sure it didn't have a penalty for paying the house off early.

Good point morris. They try all kinds of sneaky things to get ya. What i never understand is why banks sell your loan to other banks. Mine has changed hands four times now and i havent missed one payment. I guess they have a good reason.:shrug:

 

[Dr. Fade]

In other words, its about like buying an NCAA football game down from 11 to 10.

 

[Glenn Quagmire]

Snoozer,

If you're getting a 6% rate I wouldn't recommend buying it down. You're already getting an AWESOME rate at 6, much better than most people. You must have excellent credit.

Penguinfan nailed it on the head, in my opinion. If you can afford it, choose the bi-monthly payment. If that's too much, I would advise that you do pay a little more than the minimum, like others have mentioned. You would be suprised how much money you end up saving in the long run by doing that. This is assuming you want to stay in the house long-term. If not, the short-term ARM programs will have slightly better rates than the 30-Year Fixed, but again, a 6% rate on a 30-Year Fixed right now is a great rate so it would be hard to pass that up.

Other good advice I saw on here... do ask if a prepayment penalty applies. However, if your rate is about 6% that means your loan should go to a conforming lender, and they never have prepays. Always ask just in case though.

Just a personal opinion here, so take it with a grain of salt, but Flagstar Bank is a GREAT lender to work with. Not only do they have great rates but the process is typically smooth with them (they put few conditions on their files), a rarity when going through the mortgage process. Homecomings Financial tends to have good rates too. You might want to ask your LO if his company works with either or both of those lenders. They are two of the best in my opinion.

Sponge,

Having your loan sold isn't a knock on you at all. With the exception of lending giants like Countrywide, almost all lenders sell their loans to investors on the secondary market within 1-3 months. They do this because they are usually sold at a 2% or so premium, thus they would make $2 grand on a $100,000 loan. And for borrowers like you, who pay their bills every month, you will have investors fighting over your loan because they know you won't default on it.

 

[The Sponge]

Snoozer,

.

of the best in my opinion.

Sponge,

Having your loan sold isn't a knock on you at all. With the exception of lending giants like Countrywide, almost all lenders sell their loans to investors on the secondary market within 1-3 months. They do this because they are usually sold at a 2% or so premium, thus they would make $2 grand on a $100,000 loan. And for borrowers like you, who pay their bills every month, you will have investors fighting over your loan because they know you won't default on it.

i never felt it as a knock on me i just never understood it. I think i do now. What does bother me now though is how we think we own our home when the loan is paid off. I just quickly in my head realized that i will be paying over 700 dollars a month just to live here(in taxes). That is like a mortgage in itself. So really i don't own crap cause i will never be able to fit this thing in my coffin. That 700 dollars (and this is now) really can bug a guy. 700 freaking dollars? I should just sell this thing and use the 700 for a nice apartment where i have no up keep.

 

[Glenn Quagmire]

i never felt it as a knock on me i just never understood it. I think i do now. What does bother me now though is how we think we own our home when the loan is paid off. I just quickly in my head realized that i will be paying over 700 dollars a month just to live here(in taxes). That is like a mortgage in itself. So really i don't own crap cause i will never be able to fit this thing in my coffin. That 700 dollars (and this is now) really can bug a guy. 700 freaking dollars? I should just sell this thing and use the 700 for a nice apartment where i have no up keep.

Yeah, property taxes are ridiculous depending on where you live. Like you said, that's something you can never really get away from. $700 a month is pretty freaking bad. What state are you in?

 

[The Sponge]

Pa. im sure there are people who have it worse than me. Im not gonna worry tho my Democratic gov't said he is gonna take care of this. Its been about five years now and we now have gambling sites up to pay for this break. I think when i finally get the break the five tmes it raised since the allege break will eat it right up. I hear its worse in Jersey.

 

[Glenn Quagmire]

I knew New Yorkers got reamed on their taxes but I didn't know it was bad in PA too. Sounds like the East Coast is possibly worse than the West Coast as far as taxes go.

 

[vinnie]

I just quickly in my head realized that i will be paying over 700 dollars a month just to live here(in taxes).

you can stay on state road for free they even feed you :00hour